Through a Western Monocle

BY OVERTAKING CHINA to become the world’s most populous country, India has raised diverse hackles. The Chinese are indignant. China’s state broadcaster was especially annoyed.

Writing for America’s NBC News, Jace Zhang and Alexander Smith noted China’s ire: “The state broadcaster CCTV said China, which the World Bank credits with lifting almost 800 million people out of poverty in the past 40 years, was being ‘slandered’ despite ‘creating a miracle of sustainable and stable economic development with a huge population.’ Such hype lacks a basic understanding of the law of population development, it said.”

Help for China, however, is always at hand and it often comes through the fluid minds of Indians who make their living abroad.

Author Pankaj Mishra is dismissive of India’s technocratic talent compared to China’s technological brilliance. He wrote in Bloomberg (April 26, 2023) with wide-eyed admiration: “Since Deng Xiaoping’s momentous tenure, China has seemed able to tap its available intellectual potential no matter who is in power.”

He added: “Cheng Li, director of the John L. Thornton China Center at the Brookings Institution, argues in a forthcoming book that Chinese President Xi Jinping, considered more autocratic than his predecessors, has empowered a new generation of experts in IT, aerospace, 5G, robotics, AI and more. Many of these technocrats have experience competing globally at China’s state-owned enterprises.”

India may have the world’s largest pool of software engineers and thousands of tech startups—many of high quality—but Mishra remains morosely unimpressed: “Observers of India,” he wrote, “will struggle to find a comparable consolidation of talent [to China] at the highest levels of the country’s political and economic leadership.”

And then he turns to the lodestar that transfixes Indians who look at India through Western monocles: “Raghuram Rajan’s criticism of crony capitalism and ideological extremism in India did not endear him to the regime led by Prime Minister Narendra Modi. Since Rajan’s departure, new appointees appear to have compromised the independence of India’s central bank.”

That is untrue. The Reserve Bank of India (RBI) has done a better regulatory job right through the Covid-19 and Ukraine crises than America’s Federal Reserve or the Bank of England. It has reined in inflation, protected weak banks with timely corrective measures, and maintained a fine balance in monetary policy between interest rates, inflation and economic growth.

It’s no coincidence that India has emerged from two successive Black Swan events (the pandemic and the Russia- Ukraine war) with the highest GDP growth rate of a major economy. While Britain, Mishra’s adopted home, is the worst-performing economy among the G7, India is set to overtake Germany and Japan by 2026 as the world’s third-largest economy behind the US and China.

In the end, of course, it’s about politics. Mishra shows his hand at the end of his Bloomberg column though. Being a relatively sophisticated writer, he couches his words with acquired understatement: “The world’s new largest country [India] may need fresh leaders (italics mine) before it can realise its demographic dividend.”

The concept of a nation’s demographic dividend is widely misunderstood. Consider three examples: Japan, China and India.

Japan’s demographic dividend took off in the 1960s. It sparked 30 years of high growth. As Japan aged, growth sputtered to a halt. Incredibly, Japan’s GDP in 2022 ($4.10 trillion) is actually lower than its GDP a quarter century ago, in 1997 ($4.49 trillion). Part of the reason is the falling value of the yen against the US dollar. But the larger reason is the ageing of Japan which the UN recognises as the world’s “oldest” country with the average Japanese today nearly 50 years old.

Chinese authorities are terrified of the same fate befalling them. China’s demographic dividend began in the 1990s and is about to end. Growth will inevitably stall. The average Chinese is already nearly 40 years old. The UN projects China’s population will shrink by the end of this century to 700 million. Does that fact, widely publicised by the UN, find a mention in Mishra’s column. Of course, it doesn’t.

What about India? Slow as a tortoise, India’s demographic dividend, which took off around 2020, has been mocked as a potential demographic disaster, given the generally low quality of the workforce.

But with 30 years of its demographic dividend left to go, India could morph from tortoise to hare faster than those in the chanceries of Beijing and the living rooms of London would wish.

ChinaGDP growthIndian economyindustrial productionpandemicWorld Bank